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Apple's race against time in India has involved losing the top spot to Samsung and OnePlus

A decade of resilience.

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Apple iPhone is iconic in many ways. It introduced the concept of apps, cloud, App Store, and much more. With over 10 years of existence in India, it is estimated to surpass 10 million active iPhone users by the end of 2018 according to CMR’s Mobilytiks.

Despite being undoubtedly the most iconic smartphone – as well as boasting the highest level of aspiration – why is it that Apple isn’t doing as well as other brands like Samsung or OnePlus in India’s premium smartphone segment?

In the initial years, any smartphone above Rs 20,000-25,000 ($300 and above) was considered a premium smartphone. The threshold for premium smartphones has now graduated to Rs 30,000-35,000 ($500 or above). This shift was primarily due to the emergence of value-for-money smartphones driven by Chinese brands targeting upgrade markets in the range of Rs 10,000-25,000.

Apple in India

Apple’s story in India started against the market tide in 2013, when mass adoption of smartphones due to widespread adoption of 3G services, changed the market dynamics. Since then, the majority of the share is in the lower side of the market. Compared to $500 and above smartphones controlling 10-15 percent of the total smartphone market by volume, 2013 onwards, this segment has come down to between 2-6 percent.

Since 2015, when the 4G smartphone market started gaining momentum, the contribution has stagnated at three percent of the overall smartphone market. In the same time, the Average Street Price (ASP) for smartphones dipped to $186 in 2017, which was $468 a decade ago.

Samsung, the other major player in the segment as well as overall mobile handset business, took cues from the market forces that were asking for affordable smartphones. Samsung accordingly widened its portfolio in the sub-Rs 10,000 segment. As a result, its ASP also declined from $507 in 2008 to $295 towards the end of 2017.

Opportunity in the premium segment

The opportunity in the $500 and above segment mostly showed an equal preference for iOS and Android, with exceptions of a few percent points here and there. Where iOS in concerned, Apple is the only winner. However, for Android, there have been several players that tried to make their mark. Few of the prominent names include Google, HTC, Sony, Microsoft Lumia, LG and Samsung.

Gradually, the space was dominated by Samsung, and in fact premium Android smartphones became synonymous with Samsung. In 2014 though OnePlus entered this segment as a niche player. In the past few years, the Chinese company has been authoring its convincing success story.

The premium segment market threshold for Indian users is just around $500. Upon deeper introspection, it is seen that the majority share has always been in the lowest bands of $500-$600 all through these 10 years. However in recent years, spaces have opened up in these segments, and you can see players targeting each of them. This began in 2016, and throughout 2017 you could see the trend establishing itself.

This translates around 15-20 percent opportunity in each of the price bands above $500, going right up to $1,400. But the fact is this is just three percent of the overall smartphone sales. In other words, just 4.5-5 million smartphones across all these fragments with each fragment having a potential of 0.5-0.8 million units sales a year.

Apple, having tried with the iPhone 5c, was intelligent to understand that such extension is only diluting its niche and aspirational image. The brand continued with its positioning, and did not get allured with the success of others by introducing models around $500. Apple’s ASP all through 2008-2017 has been in the range of $600-$800.

Apple’s India strategy

If one analyzes the journey in India, Apple has been able to maintain its image of premium and now super-premium brand. This in turn helps it maintain consistent revenue levels even with reduced number of smartphone sales.

Apple has earned an estimated revenue of $6.4 billion cumulatively in India since 2008 from smartphones. In the past three years, its revenues have ranged $1.3-1.4 billion a year. This revenue potential of the brand is not going to change phenomenally over next few years till we expect some growth in the premium smartphone segment. This could be possible on account of upgrade cycles from mid-premium/premium to super premium, and other macro-economic factors indicating a positive outlook of the economy empowering the rising aspirational middle class with more disposable income.

Watch: Apple iPhone X Review

Apple will have to accept this market reality, and look at India from a different perspective and strategize accordingly. It might not serve well with its image, if the company reduces the prices of historical models drastically. However, it may be worth reintroducing earlier versions with a second-generation model after a while when the market is ripe for them. Apple, may have to design a custom strategy for India that is long term without diluting the aspirational value of the brand.

NOTE: All the analysis and figures quoted are based on CMR’s India Mobile Handset Research Reports 2008-2017.

The article is written by Faisal Kawoosa, who is the head of new initiatives at CMR with over 13 years of research and consulting expertise in the technology domain.

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  • Published Date: May 1, 2018 1:19 PM IST